AD ALTA
JOURNAL OF INTERDISCIPLINARY RESEARCH
FINDINGS FROM TESTING THE RELATIONSHIP BETWEEN BUSINESSES SURVIVING
SUCCESS AND MOTIVATIONAL FACTORS OF NASCENT ENTREPRENEURS.
a
CHRISTOPH ERNST WILKEN KISKER
University of Latvia, Ekonomikas un vadības fakultāte, Aspazijas
bulvāris 5 Centra rajons, Rīga, LV-1050, Latvia
email:
a
ck11004@lu.lv
Abstract: Entrepreneurship has a significant influence on the development and
economic growth of countries. Whereas successful entrepreneurship create jobs and
pay tax to countries, unsuccessful entrepreneurship unnecessary bind resources. A
wide variety of factors have an influence on the business surviving success. This study
shows that the motivation of the entrepreneur has an influence of almost 10% on the
business surviving success. The model between the motivational structure and the
geometric mean of the return on sales over three years is significant. Analyzing
different motivational factors show, that people who are founding a business because
of the desire to be independent as well as desire for social recognition have a
significant and positive influence on the business surviving success. The study shows,
that the influence of the motivation on the geometric mean of return on sales over
three years as well as the return on sales in year one, two and three after the company
was founded. The results provides governmental institutions as well as venture
capitalists a framework in order to analyses the motivational of entrepreneurs before
investing in company.
Keywords: Entrepreneurship, entrepreneur, motivation, motivational structure,
business surviving success, return on sales
1 Introduction
The influence of entrepreneurship on the economic growth of a
country was already mentioned by Schumpeter in the beginning
of the 19
th
century. According to Schumpeter, entrepreneurship
promotes the technical development of a country and promotes
innovation in countries. (Schumpeter 1934) Societies of
countries are influenced positively by high entrepreneurial
activities within in countries. For example, successful
entrepreneurs create new jobs in countries. (Aldrich 1999)
Within the entrepreneurial process, inefficiencies in societies of
countries are shown. (Kirzner, 1997)
Furthermore,
entrepreneurship is forcing competitors to be more efficient and
innovative. (Schumpeter 1934)
Literature shows a lack of connection between entrepreneurship
and the motivation of entrepreneurs. At the same time, it
becomes clear, that the entrepreneurs has high share of the
explanatory power for the success of entrepreneurship. (Rauch
and Frese, 2000) The role of the motivation of entrepreneur was
analyzed by other authors. They show that the motivation is an
important factor for the development of the founded enterprises.
(Shane et al, 2012) Baumol et al. even point out that the
motivation of the entrepreneur is the key element to explain the
process of establishing a new company. (Baumol, 1968)
2 Materials and Methods
Data set of entrepreneurship are rare since it is difficult to
identify entrepreneurs in the first years and they are most often
not willing to share detailed information. The first data set with a
large scale is PSED I, which was recorded in the late nineteenth.
Entrepreneurs were called every year for 3 years to record a
large set of variables. Based on the first PSED, which was
recorded exclusively in the USA, the GEM (Global
Entrepreneurship Monitor) was conducted in fourteen countries.
This data set was used to compare countries regarding the
entrepreneurial activities. The weakness of this dataset is, that it
didn’t record the development of the founded business over time.
The second data set of PSED took the experience of the prior
dataset and improved it further in terms of methodological
issues. The data sample of the PSED II dataset is representative
for 12.6 million entrepreneurs in the USA, which is significant
larger sample than PSED I and the GEM. In addition to the size
of the sample and the methodological improvements, the PSED
II differs from the other dataset since it records the data for 5
years. The PSED II is recorded in order to gain a more detailed
picture on the people who become entrepreneurial active, the
entrepreneurial process itself and the relationship between the
characteristics of the entrepreneur and the outcome of the
entrepreneurship. (Reynolds et al., 2005)
The record of the PSED II dataset started in the year 2005 by
calling 31,845 people in the USA by a professional screening
company in order to identify people who are in the process to
find a business. The study was initiated and organized by the
University of Michigan. The identification of the entrepreneurs
are based on several factors. The entrepreneur has to own the
business, participate in entrepreneurial activities by himself and
the founded business has to be in an early stage of the
development. In total, 1214 entrepreneurs where identified who
were willing to participate in the survey. The interview to
identify the entrepreneur in the screening interview call was only
two minutes. The first interview was sixty minutes and among a
wide range of information, the motivation of the entrepreneur
was recorded. The entrepreneur were called exactly one year
after the initial interview for the following five years.
(Davidsson, 2006) (Reynolds & Curtin, 2007)
PSED II is the largest dataset about entrepreneurship available,
but also has some information missing for specific variables. For
example, the entrepreneurs were not always willing to share the
financial information. In the first step, the dataset has to be
cleaned for rows which have missing information. The necessary
information for this study are the motivation of the entrepreneur
to start the company as well as all information about the revenue
and expenses for the first 3 years. The identified records in the
dataset, which include all relevant information, are 103 sets.
The motivation of the entrepreneur was recorded by 14
motivational variables. The entrepreneurs rated themselves on a
scale from 1 to 5. In that way, there is one or more dominant
motivational factors in the motivational structure of the
entrepreneur. The motivational variables from the PSED II
dataset were analysis by factor analysis. The result of the
analysis is, that there are four motivational factors with have
significant loadings from the motivational variables. The four
factors identified are the desire for independence, need for
achievement, need for social recognition and the desire for
financial reward. The business surviving success is demonstrated
by different financial factors. The financial information from the
PSED II data are the expenses and revenue for 3 years. Based on
this information, the profit for each year is calculated. With the
information on the revenue and profit, the return on sales is
calculated for all 103 founded enterprises. The return on sales for
the first 3 years after the company was founded are 3 indicators
for the business surviving success. In the next step, the
geometric mean of the return on sales over three years is
calculated. This financial indicator provides a stable picture on
the business surviving success over the years.
The relationship between the motivational factors and the
business surviving success, indicated by the return on sales for
each year separately as well as the geometric mean on the return
on sales over three years, is tested by a multiple regression
analysis. The results of each of the multiple regression analysis
is shown separately and interpretation is done by taking into
account all different results. The results of the multiple
regression analysis are demonstrated in several tables in the next
chapter.
3 Results
The relationship between the need for achievement, desire for
financial reward, strive for independence as well as the need for
social recognition and the geometric mean of 3 years on the
return on sales is build and evaluated. The four motivational
factors are the dependent variables and the geometric mean of
the return on sales as the business surviving success is the
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